As the Cal State University considers creating a graduate incentive fee, the University of Texas at Austin plans to pay students who graduate on time.
In an effort to increase its four-year graduation rate, UT Austin announced a pilot program Thursday that would shave off $1,000 to $2,000 of students’ unsubsidized federal loans for students who take more classes.
Unsubsidized loans are the most expensive federal loans and must be repaid at 6.8 percent interest for undergraduates, according to the Federal Student Aid website.
UT Austin aims to measure whether this incentive will encourage a group of 200 freshmen in fall 2013 to complete the 15-unit loads that are necessary to graduate in four years, according to UT Austin Director of Student Financial Services Thomas Melecki.
“We are trying to blast our students out of that 12 to 13 [unit] semester mentality,” Melecki said.
The program is being funded by state regulated money but paid for by students, Melecki said. Financial aid is distributed based on financial need and can be awarded through grants, scholarships, work-study programs and loan replacement assistance. UT Austin’s program is a form of loan replacement assistance.
CSU Spokesman Erik Fallis said this type of a program is thought to be unneeded in the CSU because financial aid in the system is distributed mainly in the form of grants.
“Half of undergraduate CSU students have their tuition paid for by financial aid and do not need to take out loans,” Fallis said. “We encourage all students to apply for financial aid, as many are really surprised to find out how much they qualify for.”
The CSU offers $700 million in grants and scholarships outside of state and federal awarded financial aid, Fallis said.
When asked what she thought of UT Austin’s program, Jessica Ott, a senior French and international studies major, said she preferred the aid that the CSU offers.
“It’s an interesting idea, but I like the grant system we have here a lot better,” Ott said. “With any type of loans, someone is always making a profit. Plus, it’s not necessarily better to graduate on time. Students should be able to take their time and get the most out of their college experience. “
Ryan Yamaguchi, a senior business economics major, said that he didn’t think partial loan forgiveness would be enough of an incentive for students.
“Graduating in four years has lost its attractiveness in this economy,” Yamaguchi said. “It was different when there was jobs to be had.”
The results of UT Austin’s pilot program will not be available until 2014.
“We are not thinking of changing our current grant program to a loan program or a loan assistance program at this time,” Fallis said. “We do keep an eye on programs that other universities are trying and incorporate them where they make sense.”